Does Anyone Read the Fine Print? Testing a Law and Economics Approach to Standard Form Contracts
AbstractA cornerstone of the law and economics approach to standard form contracts is the Òinformed minorityÓ hypothesis: in competitive markets, a minority of term-conscious buyers is enough to discipline sellers from offering unfavorable boilerplate terms. The informed minority argument is widely invoked to limit intervention in consumer transactions, but there has been little empirical investigation of its validity. We track the Internet browsing behavior of 45,091 households with respect to 66 online software companies to study the extent to which potential buyers access the standard form contract associated with software purchases, the end user license agreement. We find that only one or two out of every thousand retail software shoppers chooses to access the license agreement, and those that do spend too little time, on average, to have read more than a small portion of the license text. The results cast doubt on the relevance of the informed minority mechanism in a specific market where it has been invoked by both theorists and courts and, to the extent that comparison shopping online is relatively cheap and easy, suggest limits to the mechanism more generally.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 09-04.
Length: 44 pages
Date of creation: Aug 2009
Date of revision: Aug 2009
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Web page: http://www.NETinst.org/
online contracts; clickwrap; informed minority; ecommerce law; contracts law; standard form contracts;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-EXP-2009-09-11 (Experimental Economics)
- NEP-MIC-2009-09-11 (Microeconomics)
- NEP-MKT-2009-09-11 (Marketing)
- NEP-REG-2009-09-11 (Regulation)
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